Is the pound set to make a comeback against the Euro?

[jinx57]

Might there be a move afoot by the powers that be to have EUR £ parity or thereabouts for some considerable time in order to bring UK into the EUR currency?

[Mat]

There is no reason for the pound and euro to be in parity to join the eurozone.

[houseman]

Jinks57: I am not a qualified economist but I think I have a basic grasp of the principles of currency exchange, for which reason I dismiss the idea that there is any "plan" to get the £ down to 1:1 euro so that we can join the eurozone. Fact is that a currency can join the eurozone at just about any rate at any time, as long as the country owning that currency complies with the criteria laid down by the EU members. Yes we know that they have bent the rules about all sorts of stuff in the past, particularly lately about the proportion of GDP the nation's debts are allowed to represent, but even so there are no rules to say that a currency has to be at parity before joining.
The Treasury say obscure things like "we will join when it is to our advantage to do so" hinting that they would like the £ a bit stronger, but then they blow it by "quantitative easing" which sends the opposite message to the markets. The PM has been travelling over the world selling the benefits of QE to all and sundry, to mitigate the effect in the UK alone, and so worldwide public sector debt reaches record levels.
Long-term interest rates in the UK have always been higher than mainland europe and the USA and I'm not sure why, but in that fact lies our longer term scenario. As they rise, the £ will also strengthen. The currency speculators will then make sure that the rise goes beyond what would otherwise be a sensible level, just as they have done on the downside with the euro and dollar recently.
But the EU is a formidable competitor for UK business, and the £ cannot be allowed to get too strong as it makes exports uncompetitive. But with eastern bloc members (and the likes of Brazil, Russia, India and China) having such low labour costs, I think the deck is loaded against us.

[marbellapete]

It would not be in UK interest to enter euro at a low exchange rate because that would make the country poorer, all payments we make as a nation to the EU fund would be relatively higher etc etc..... The time span we are looking at small in the scheme of things.It just depends whether you think the pot is half full or half empty.

[markie]

there has been talk of a recovery in the economy lately.

most people probably dont think about this, but the new flu virus is expected to wreak havoc this autumn (even in its current unmutated form). the prospect of around 40% of the workforce being off work for 2 -3 weeks each, not to mention if children get it and their Mum's stay home, and it adds up to a major setback to GDP. only a month or so to go until this starts. And there is such a hype built up about it, I think many people will think "swine flu" thats got to be worth an extended period off work, even if their symptoms are mild in some cases.

I read something somewhere a couple of months back, and this is expected to be a significant setback to already beleaguered economies, borrowed up to their eyeballs to try and get out of last years mess. How much more spending and debt will be required to get out of this hole thats coming.

therefore cant see interest rates rising in the UK, and I think the pound hasnt got much scope to rise against the Euro!

Mark.

[marbellapete]

It just depends whether you think the pot is half full or half empty.

As I said

[markie]

i think all governments will be creating more money to pay off the vast amounts of debt that have accumulated. the worse off ones will have to print more to pay the higher debts, and hence weaker currencies. We all pay for this through higher prices and devalued currencies. Given that the UK and US are probably the most affected by the downturn then I think they will be the bottom of the pack for a long time. Not an economist but its my gut feeling. Its also a crafty way of raising the money to pay the debt without raising tax levels. Therefore if the UK government has had to borrow more than the Europeans i think it will affect the pound for a long time.

The dollar is likely in a pretty rough state which perhaps jeopardises its very existence, particularly as more middle east countries switch to dealing in Euros for oil (Iran is doing this, and Saudi Arabia is considering it). This is likely to make the Euro an even stronger currency. Watch out for the new North American currency (US Canada Mexico) coming in the next new years, the Amero. The fate of the pound, I have no idea about.

Im already hearing first hand rumours about people buying gold right now as they have serious doubts about currencies.

Mark

[regfrancis]

the official interest rate for the Euro is practically nothing, but Bulgarian banks offer 7+ % for term deposits. You have to go personally to the branch to deposit and withdraw, otherwise it's government guaranteed- and all rosy?? or is it???

[scot47]

I cannot understand how BG banks are offering such high returns. If they are paying 7 percent then they must be getting a higher return. Or is the whole banking ssytem a giant Ponzi scheme ?

[Brandi]

I don't see why they should not be in a position to offer 7 percent on deposits, given they charge 10-12 percent APR on mortgages and other loans. Plus, very few banks actually give 7 percent .... ads normally cleverly say UP to 7 percent and terms and conditions do apply.